Oil drilling permits issued in Michigan hit 89-year low

BySam Corden | December 16, 2016

The past decade has been slow for oil and gas development in Michigan, but in 2016 the industry come to a near halt.

So far this year, the Michigan DEQ reports that it has only granted 40 drilling permits. That’s fewer permits granted than every year in history, except for 1927, the first year that Michigan issued permits.

The reasons include fewer oil discoveries and growing markets for alternative energy, but experts say the decline can be mainly attributed to an over-saturated global market.

Nearly all major oil producing nations, including the United States, are pumping at record levels. Despite that high demand, there is still a lack of market stability, due to all that oil and gas that is produced.

Lee Jones, a retired exploration geologist, who worked in Michigan oil and gas for more than 40 years, says companies just don’t have the cash to drill more wells.

“Because of the crash in prices, companies just don’t have any cash flow, or much cash flow to drill wells,” he said. “So that’s been a negative for the local oil and gas industry.”

A barrel of oil has consistently been less than $50 dollars on the global market since July of 2015, and with prices so low, local energy producers in states like Michigan have been forced to scale back.

And it’s not only permits that have fallen. The number of permitted wells that actually get drilled is also low.

Of the 40 permits issued in Michigan, only 10 have spawned any drilling activity, and half of those wells have been dry, said Mark Snow, a supervisor in the Permits and Bonding office of the MDEQ

Right now, OPEC nations are negotiating how they’ll approach oil production in the coming years, Jones said. Already some oil development projects have been canceled or delayed. Once OPEC concludes its talks, world markets are expected to stabilize.

Once that happens, Michigan production will increase, he said.

Editors note: This story was corrected Dec. 17, 2016, to accurately reflect the price of a barrel of oil.

This story was produced as part of a partnership between Michigan State University’s Knight Center for Environmental Journalism and Interlochen Public Radio where it first appeared.

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